Tata Steel plans to ink an agreement with Japan-based Nippon Steel Corporation (NSC) by end-this month to set up a Rs 2,400-crore steel plant for producing auto-grade steel.

The proposed JV facility is expected to commence operation in the next two years at the Tata Steel's existing unit in Jamshedpur.

"The JV with Nippon will be signed by January this year and we expect to start production from this facility by early 2013," Tata Steel Managing Director H M Nerurkar told media here.

The JV with 50:50 holdings would come up at an investment of Rs 2,400-crore. The facility's initial capacity would be 0.6 million tonne (MT) per year, Nerurkar said.

The JV aims to capture the growing demand for high-tensile auto-grade steel in India. Nippon, the world's second largest steelmaker will transfer its technology for producing auto-grade steel.

"The demand for small cars in India is rapidly growing and we aim to tap the this growing market," Nerurkar said adding, Nippon's technology would help Tata Steel to tap the Japanese auto makers in the Indian auto market.

Global automajors like Honda, General Motors and Hyundai Motors currently import steel for making cars. "We hope the new facility will cater to the demand of the growing automobile industry in India," he said.

Japan's JFE Steel Holdings has recently picked up a 14.9 per cent stake in JSW Steel to make auto-grade steel.